Citi and BofA surge ahead in transaction banking
Citigroup and Bank of America have reported record transaction banking revenues, while JP Morgan showed a modest decline.
After a year which saw treasurers place increasing focus on efficiency of bank relationships, Citi and Bank of America have stormed ahead to become the world’s top transaction banks as measured by revenue. With banks racing to enter partnerships and acquire start-ups, the results highlight the importance of fintech collaboration in achieving growth.
In its year-end earnings release on 14 January, Citigroup said its Treasury and Trade Solutions business earned record annual revenues of $10.3 billion in 2019, as much as its investment banking, corporate lending and private banking businesses combined. Bank of America reported revenues for Global Transaction Services of $8.6 billion for the same period, overtaking the contribution from business lending for the first time. According to a Bank of America spokeswoman, the bank earns additional transaction banking revenue not included its GTS reported revenues.
Meanwhile, JP Morgan reported a 3% decline in annual Treasury Services revenue across its corporate & investment bank and commercial bank businesses to $8.5 billion, according to results published the same day as Citi. JP Morgan CFO Jennifer Piepszak blamed interest rate declines, telling investors that the result was “primarily due to deposit margin compression which was largely offset by organic growth”.
Transaction banking income accounts for much smaller percentage of overall revenues at JP Morgan, where surging investment banking and trading revenues led the bank to deliver results which were more profitable than any bank in history.
All three banks also reported an increase in corporate deposits in 2019. Citi overtook HSBC at the end of 2018 as the world’s biggest transaction bank by size, with $509 billion corporate deposits compared to HSBC’s $499 billion. Citi’s corporate deposits now stand at $536 billion, while HSBC won’t report its year-end figures until mid-February.
JP Morgan’s corporate deposits jumped by 8% during the year to $485 billion. This represents a challenge for the bank because its stagnating transaction bank revenues mean that the return on assets of this business is lagging far behind Citi and Bank of America, whose corporate deposits were $383 billion on 31 December.